“Several Shades of Grey” – The Potential Dark Side of Channel Incentive Programs Part I

At this year’s Incentive Leadership Forum in Punta Cana, HMI/MMI included a prominent academic team of researchers from leading universities in the fields of channel performance and loyalty engineering. Almost all of the world-class companies that participated in the Forum agreed that research is the lifeblood of a successful reward and recognition program and the key to revealing the changing landscape and behaviors of the channel.

One of the best sessions of the event was called “Several Shades of Grey: The Potential Dark Side of Programs.” We learned a lesson in behavior when Dr. Ko de Ruyter of Maastricht University asked the audience who had read the popular book “50 Shades of Grey”. Let’s just say this small audience’s response didn’t quite align with the global statistics of this wildly popular book. But the session did provide some buzz to the Forum, and Dr. Ko de Ruyter certainly had everyone’s attention.

The witty play on the popular book’s title was appropriate as the workshop focused on how to avoid the “darkest” aspects of loyalty program behavior. Earlier this year, Gartner shined a light on these negative traits in a report that they published. However, unlike Gartner’s report, which focused on the criminal challenges of programs, the forum focused on strategic challenges that could actually be controlled by program architects.

Jan (Ya-wn) Pelser of Maastricht University shared some studies relating to the topic, “What Motivates Your Audience? Gratitude vs. Indebtedness.” The question is when you reward your channel does your incentive program show gratitude and appreciation? Or does it make the participant after receiving an award feel like they owe you something? One amazing point I took from this session was that even though gratitude would seem to obviously be a more motivating influence, nonetheless a significant number of program designs actually lean toward indebtedness. Jan shared some of his fascinating case studies that showed that, while both strategies can be initially effective, gratitude ultimately yields much higher rewards when it comes to long-term loyalty. On the darker side, indebtedness, in many cases, provides an inferior preliminary lift, and can also even have negative effects in the long term. While you might sway a partner’s business today, with an approach based on indebtedness you are risking pushing your partner away in the future.

Finally, although the session focused on how to show more gratitude in your program’s rule design and strategy, another opportunity to express gratitude could be found in the awards themselves. Studies have shown that participants are much more likely to feel indebted when they receive cash rewards. On the other hand, when they redeem for a “trip of a lifetime” or “concert tickets to see their favorite band,” they felt much appreciated and on the gratitude-end of the continuum. Over the course of the studies, participants were much more engaged and enthusiastic when they had gratitude toward the reward. You may have heard me reference this phenomenon before, as something I like to call ROE (Return on Experience).

Many people think that long-term loyalty is hard to measure—and usually they’re right. But the incredibly smart people who develop loyalty laboratories have proven that, in fact, there are concrete ways to achieve measureable results. This has been something of a revelation for me.

In part II of “Several Shades” I’ll share how Dr. Debbie Keeling from Loughborouch University tackled “Complacency in Relationships – Can You Beat it?”

Contact me if you would like to hear more about these studies, or would like to be introduced to these amazing resources and wonderful people.
Move the Channel,
Travis